Amity Shlaes explains for National Review Online readers why University of Chicago professor Casey Mulligan has just been awarded a prize named for free-market icon Friedrich Hayek.
Big Truth No. 1: In 2008, the government and the Federal Reserve rescued too many banks, and too arbitrarily. Too Big to Fail can’t be a perpetual doctrine.
Big Truth No. 2: Programs that aim to help the poor reduce overall work, including, eventually, work opportunities for the poor. Many people understand the theory behind this argument, but lack data. Especially precise data.
This is why the jury for the Manhattan Institute’s Hayek Prize this week awards the prize to The Redistribution Recession by Casey Mulligan of the University of Chicago.
Mulligan, a kind of anti-Piketty, delivers facts and numbers. He shows which programs expanded or maintained during and after the financial crisis made unemployment higher. Food stamps, for example, were made available to more people, decreasing their interest in finding employment that might disqualify them. Legislated changes in the unemployment-insurance programs extended the period in which Americans could receive such benefits. COBRA, the program ensuring laid-off workers access to their jobs’ health insurance for a time, was sustained as well.
Mulligan’s very data-based conclusion: “At least half, and probably more, of the drop in aggregate [work] hours would not have occurred, or at worst would have been shortlived.”
What about today, and the future, for example, under the Affordable Care Act? The health-care act, Mulligan finds, raises the effective marginal tax rate five percentage points for nonelderly families. That means those families will, practically speaking, receive five cents less than they would have prior to the act on the last dollar they earn.
Or, to put it another way: The law incents people to work less. Six to 11 million Americans can make more money by earning less because of the perversities of the Affordable Care Act.
